GeoPark Limited — FY2017 Form 20-F
Reporting period: Year ended December 31, 2017. This is an annual report, not a quarterly filing; standalone fourth-quarter financial results are not clearly provided. Financial statements are audited and prepared under IFRS in U.S. dollars.
Business context and key financial metrics
GeoPark is an independent oil and gas exploration and production company operating in Colombia, Chile, Brazil, Peru and Argentina. Average net production rose 23% to 27,586 boe/d; oil represented 83% of production. Colombia contributed approximately 80% of revenue and was the principal operating engine.
- Revenue: $330.1 million, up 71% from $192.7 million in 2016. Oil sales were $279.2 million and gas sales $51.0 million. A separate $15.4 million loss on commodity risk management contracts reduced reported operating results.
- Profitability: Operating profit was $79.0 million, versus an operating loss of $28.6 million in 2016. Net loss was $17.8 million; loss attributable to GeoPark shareholders was $24.2 million, or $0.40 per share. Adjusted EBITDA, a non-IFRS measure, was $175.8 million, with a 53.2% margin.
- Cash flow and investment: Operating cash flow was $142.2 million, compared with $82.9 million in 2016. Investing cash outflow/capital expenditures were $105.6 million, versus $39.3 million. Cash increased by $60.5 million to $134.8 million; the increase also reflected financing activity.
- Liquidity and debt: Total borrowings were $426.2 million and cash was $134.8 million, implying net debt of $291.4 million. The current ratio was approximately 1.29, based on current assets of $215.0 million and current liabilities of $166.3 million. The reported gearing ratio was 70%.
- Reserves: Year-end net proved reserves were 95.7 mmboe in Colombia, Chile, Brazil and Peru, up from 73.6 mmboe in 2016; Argentina was excluded because reserves were not declared commercially viable. About 39% of proved reserves were developed.
Material changes versus 2016
- Oil revenue increased with higher realized prices and Colombian volumes: the Colombian realized oil price rose to $36.1/bbl from $24.4/bbl, while average net production increased to 27,586 boe/d from 22,394 boe/d.
- Colombia net revenue more than doubled to $263.1 million. Chile revenue declined 11% to $32.7 million as production fell; Brazil revenue rose 15% to $34.2 million, principally on higher gas prices.
- Production and operating costs increased 47% to $99.0 million, largely from higher royalties and production volumes. Administrative expenses rose 23% to $42.1 million.
- Financial costs rose 51% to $51.5 million, including $17.6 million of one-time costs to cancel the 2020 notes. A $13.9 million foreign-exchange gain in 2016 became a $2.2 million loss in 2017.
- GeoPark issued $425 million of 6.50% senior secured notes due 2024 and used proceeds to repay its 7.50% notes due 2020 and the Itaú facility, among other purposes. More than 99% of year-end debt was stated to mature in 2024.
Outlook, risks and unusual items
- 2018 plan: The preliminary base capital program was $100–110 million, based on a $50–55/bbl reference oil price and intended to be funded from operating cash flow and cash on hand. The downside plan was approximately $50–90 million if oil was below $50/bbl; the upside plan was $120–150 million at $60/bbl or higher.
- Hedging: Management uses zero-premium collars and three-way hedges to support cash flow. The filing describes 2018 hedge coverage and price ranges; derivatives are not accounted for as hedge accounting instruments, so fair-value changes affect earnings.
- Acquisition: The $52 million purchase of the Aguada Baguales, El Porvenir and Puesto Touquet blocks in Argentina closed on March 27, 2018, after year-end. The assets were described as producing about 2,700 boe/d; the filing recorded a $15.6 million security deposit at December 31, 2017.
- Concentration and operating risks: Trafigura accounted for 79% of consolidated revenue, and purchased almost all operated Colombian oil under an agreement covering 2018 volumes. Production and reserves are concentrated in Llanos 34; commodity prices, customer dependence, pipeline access, regulatory and community issues, currency movements and reserve-estimation uncertainty are material risks.
- Other notable items: No 2017 impairment charge was recorded, following a $149.6 million impairment in 2015 and a $5.7 million reversal in 2016. The 2017 tax expense was $43.1 million despite a pretax profit of $25.3 million. The company reported no cash dividends and no off-balance-sheet arrangements at year-end.
- Audit and controls: PwC issued an unqualified opinion on the IFRS financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not provide an ICFR attestation.
Important facts for investors to verify
- Confirm the 2018 capital plan, funding assumptions and realized performance against the stated oil-price scenarios.
- Review the notes due 2024 covenants, collateral, maturity profile and capacity for additional borrowing or restricted payments.
- Assess the sustainability of Colombian production growth, reserve additions and the dependence on Llanos 34 and Trafigura.
- Verify the post-year-end Argentina acquisition’s final economics, integration, production and funding impact.
- Reconcile reported revenue, commodity-hedge losses, taxes and net loss to the audited statements and notes; the filing’s selected figures do not provide standalone Q4 results.